On president's signature, reg revisions become law

Dec. 4, 2015 -- President Obama late Friday afternoon signed into law legislation giving privately insured, state-chartered credit unions access to the Federal Home Loan Bank (FHLB) system – as well as a number of additional regulatory revisions for credit unions and other financials, which were overwhelmingly approved by Congress Thursday.

Under the PICU FHLB provision, a credit union can be eligible for FHLB membership “only if the appropriate supervisor of the State in which the credit union is chartered has determined that the credit union meets all the eligibility requirements for Federal deposit insurance as of the date of the application for membership.” However, the provision also notes that, if the state supervisor fails to make the determination "by the end of the 6-month period beginning on the date of the application," the credit union shall be deemed to have met the requirements.

In addition to the provision for PICU FHLB membership, the measure requires a Government Accountability Office (GAO) study of private share insurance (due 18 months after the bill’s enactment – which would be approximately May 2017) related to adequacy of private insurers’ insurance reserves, and “information on the level of compliance with Federal regulations relating to the disclosure of a lack of Federal deposit insurance.”

Other credit union-related provisions in the measure would: modernize privacy notification requirements to allow all financial institutions to send notices only when there is a policy change, not on an annual basis, and; direct the Consumer Financial Protection Bureau (CFPB) to establish an application process determining whether an area should be designated as a rural area., which (among other things) affects the types of products credit unions may offer their members in these areas.

A key provision for banks: the legislation gives the FDIC authority to raise bank eligibility for an 18-month exam cycle for well-run community banks with up to $1 billion in assets (now, the ceiling is $500 million). Credit unions are not included in the provision. (NCUA Board Chairman Debbie Matz, commenting in late October about a proposed 18-month cycle for low-risk credit unions, said “I’m not saying no, just that this is not the right time,” indicating she prefers to see the impact on credit unions of recent regulatory relief efforts before altering exam cycles).